By Nel Weddle
LONDON (ICIS)--European butadiene (BD) players are, on the whole, cautiously optimistic for the year ahead but no-one is expecting any major fundamental shifts.
“It’s a reasonably positive industry, [but its] still looking for direction,” a producer said.
Several sources thought 2014 would be a re-run of 2013 for the most part although now many are feeling a little more encouraged by the small and slow improvements on the economy front.
From the macroeconomic standpoint, BD sources said they expected a gradual recovery from January to December, a “slight and soft recovery growth” according to one source.
Sources said that while domestic demand was looking fairly strong for the start of the year this was largely attributed to re-stocking demand.
“We will see good demand in January and February... this is the restocking effect on our side and also for our customers,” a consumer said.
“We have strong nominations for January, so we expect the current tightness to persist,” a second producer said, referring to the balanced-to-tight supply situation being seen in December 2013 as a result of unplanned BD production issues as well as seasonal operating rate reductions on crackers in general.
One difference between 2013 and 2014 is the view that European sources have of the Asian market both pre and post Chinese lunar new year.
In 2013, Asian buyers had built significant inventory ahead of the post Chinese lunar New Year demand spike, but this never came - hampered by the soft global economic outlook - and this left traders scrambling to liquidate long positions. Asian spot prices fell rapidly and Europe as a structural exporter had to eventually follow suit.
But in 2014, the general view is that stocks in Asia have not been built up to the same extent - and even if Asian buyers buy on a hand-to-mouth basis - at least this is real demand.
However, some said that the market will only see improvement in the second half of the year.
“There is no boom in demand being it at BD monomer level or in derivatives for export, that we can find clear signals for right now,” a second consumer said.
“I believe in a slow recovery, [the market] limping along,” the second consumer added.
One source said it expected the latex sector to see stable-to-lower demand as the European paper industry continues to go through some structural changes.
The synthetic rubber sector generally expected to be stable for the most part depending on the economy, although the impact of new large capacity units in India due onstream next year has still to be determined.
The auto sector in the EU has shown some improvement in 2013 - notably for the last three consecutive months, according to the European Automobile Manufacturer’s Association (ACEA) - so some BD players think that the worst is now behind us.
Another big question mark for Europe in 2014 is how well will the ethylene-driven crackers perform. For much of 2013, European BD producers had been shielded from the global BD downturn because of supply restrictions caused by the underutilisation of crackers, a heavy cracker maintenance slate and the preference for cracker operators to crack lighter feedstocks - all of which limits the output of crude C4 BD feedstock.
However, new BD capacity in Antwerp, Belgium for BASF; in Schwechat, Austria for OMV; and for Hungary-based producer TVK in Tiszaujvaros, is due onstream in 2014 - totalling about 270,000 tonnes/year - and some sources think it unlikely that the new capacity will reach its full output in 2014.
The cracker maintenance slate for 2014 is much less heavy than in 2013 and additionally is weighted towards the second half of the year. The long-held concerns regarding European cracker competitiveness versus Middle East and US crackers will not subside in 2014 and sources do expect more rationalisation.
2013 saw several announcements regarding supply rationalisation. These included the closure of Total’s NC1 cracker at its site in Antwerp, and the expected closure of its cracker in Carling, France, by 2015.
INEOS announced the closure of its G4 naphtha cracker in Grangemouth, the UK by the second quarter of 2015. Repsol said it would downsize ethylene and propylene capacity at its Puertollano Spain site by 2015.
In the third quarter, Versalis reduced the capacity of its cracker in Priolo, Italy, by closing one of two lines - its new ethylene capacity is 470,000-490,000 tonnes/year.
It is clear that 2014 will bring some new challenges but maybe the greatest will be keeping Europe’s pricing carefully positioned in the global market to enjoy the benefits of being a structural exporter while keeping an eye on costs.
BD production 2014 maintenance schedule*
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